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A Quick Look at Heckmann's First-Quarter Earnings

Oil and gas environmental service provider, Heckmann (NASDAQOTH: NESC  ) , reported first-quarter earnings on May 8. The company missed slightly on both the top and bottom lines which sent shares dipping in after-hours trading. However, all was not lost on the quarter so let's dig in and see what happened.

A deeper look at the numbers
Going into the report analysts were expecting a loss of a penny a share on revenue of $166.9 million. For the quarter, Heckmann produced revenue of $159.5 million and had a loss of $0.05 a share. However, revenue for the quarter nearly tripled year over year and the company delivered adjusted EBITDA of $32.1 million.

The biggest culprit contributing to the miss was unusually harsh weather. Heckmann pointed out that weather affected 13 days of work in its Bakken operations with additional days being lost to weather in the Marcellus. Heckmann was far from the only company to have a weather-related miss in the quarter. While the company planned for weather to be a factor, it turned out to be worse than expected.

Outlook intact
Despite the slight miss in the quarter, Heckmann reiterated its full-year guidance. The company still sees revenue of $750 million-$825 million with adjusted EBITDA in the $200 million-$220 million range. It's seeing notable organic growth in its Eagle Ford and Mississippian Lime operations and tremendous cross-selling opportunities within its business segments, which gives it confidence that it can hit those targets.

Heckmann also expects E&P companies to steadily ramp up activity later this year while pricing for its services is stabilizing. It's a sentiment that's echoed by oil-field service peer Halliburton (NYSE: HAL  ) . On the company's last earnings conference call CEO David Lesar said that, "North American headwinds from last year are largely behind us, and we are optimistic about activity levels and continued margin improvement for the remainder of the year." That outlook is shared by most of the oil-field services industry and Heckmann pointed out on its conference call that it has several customers that have already begun to ramp up activity levels. 

Growth prospects
Heckmann is managing its growth carefully; its working to leverage its existing asset base. That's keeping a lid on its capex, though the company does plan to spend between $90 million and $110 million in capex this year. Further, its being very disciplined in its pursuit of acquisitions with a focus on deals that would allow the company to expand its treatment, recycling, and disposal network. It sees this as being consistent with the strategy of leveraging its transportation network and providing an end-to-end solution to its customers. The company also sees the opportunity to consolidate its industry and it is in very active discussions on four small acquisition opportunities which it believes it will close in the current quarter.  

Foolish bottom line
While the company missed expectations in the quarter the story here is still very much intact. Heckmann sees its business momentum picking up in the second half of the year as industry activity ramps up. Further, it believes that its national footprint and its approach based on integrated solutions will continue to win customers, which is why it's confident that it won't have any problems meeting its full-year guidance. 

Heckmann's business still only serves a small part of the shale boom which will makes its shares much more volatile from quarter-to-quarter. If you still want to invest in the future of the shale boom, but would prefer less volatility, then investors would be wise to consider Halliburton, one of the top companies in the business and one of those most in tune with the domestic market. To access The Motley Fool's new premium research report on this industry stalwart, simply click here now and learn everything you need to know about how Halliburton is positioning itself both at home and abroad.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 09, 2013, at 2:07 PM, RonLitchman wrote:

    The problem here was not with the company, which had a reasonably good quarter, but with the analysts, who got it wrong ( as usual).

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